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Budget Analysis 2014

Budget Analysis 2014. Direct Taxes. Sanjeev Kavish and Associates Chartered Accountants 1011, LGF, Sector-15-II, Gurgaon. Haryana. www.skaca.in . email: sanjeev.singhal@skaca.in. Highlights of Budget,2014. A. Rates of Income Tax Rates of Tax :-

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Budget Analysis 2014

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  1. Budget Analysis 2014 Direct Taxes Sanjeev Kavish and Associates Chartered Accountants 1011, LGF, Sector-15-II, Gurgaon. Haryana. www.skaca.in. email: sanjeev.singhal@skaca.in

  2. Highlights of Budget,2014 A. Rates of Income Tax • Rates of Tax :- There is no change in the rate of income tax, surcharge , education and SHE cess. The rates for AY 2015-16 will remain the same as in AY 2014-15. • New Income Tax Slabs for AY 15-16 :- • Individual, Hindu Undivided family, association of persons, body of individuals, artificial person.:- Sanjeev Kavish and Associates Chartered Accountants

  3. Highlights of Budget,2014 • Individual , being a resident in India , who is of the age of Sixty years or more but less than eighty years :- • Individual , being a resident in India , who is of the age of Eighty years or more:-

  4. Highlights of Budget,2014 B. ADDITIONAL RESOURCE MOBILISATION MEASURES I) Dividend & Income Distribution Tax It  is  proposed  to  amend  section  115‐O  in order  to  provide that  for the purposes of determining the tax on distributed profits payable in accordance with the section 115‐O, any amount by  way  of  dividends  referred  to  in  sub‐section  (1)  of  the  said  section,  as  reduced  by  the  amount referred  to  in  sub‐section  (1A)  [referred  to  as  net  distributed  profits], shall be increased  to such amount as would, after reduction of  the  tax on such increased amount at  the rate specified in sub‐section (1), be equal to  the net distributed profits. Sanjeev Kavish and Associates Chartered Accountants

  5. Highlights of Budget,2014 Similarly treatment is proposed for distribution of income to unit holders under section 115R. the amendment shall be applicable w.e.f 01-10-2014 Sanjeev Kavish and Associates Chartered Accountants

  6. Highlights of Budget,2014 II). Holding period qualifying for LTCA by unlisted securities and units of MF increased It is proposed to amend the provisions contained in  clause (42A) of section 2 so as to provide that an unlisted security and a unit of a mutual fund (other than an equity oriented mutual fund) shall be a short‐term capital asset if it is held for not more than thirty‐six months.  These amendments will take effect from 1st April 2014. III) Tax on Long Term Capital Gains on units It is proposed to amend the provisions of section 112 so as to allow the concessional rate of tax of ten per cent  on long term capita gain to listed securities (other than unit) and zero coupon bonds.  These amendments will take effect from 1st April , 2014. Sanjeev Kavish and Associates Chartered Accountants

  7. Highlights of Budget,2014 C.MEASURES TO PROMOTE SOCIO‐ECONOMIC GROWTH I) Investment Allowance to a Manufacturing Company • It is also proposed that the deduction u/s 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than Rs. 25 crore in plant & machinery in a Previous Year. • Period of investment in plant and machinery extended to 31-03-2017 • The assessee who is eligible to claim deduction under the existing combined threshold limit of Rs.100 crore for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under the existing provisions contained in sub-section (1) of section 32AC even if its investment in the year 2014-15 is below the proposed new threshold limit of investment of Rs. 25 crore during the previous year (wef AY2015-16) Sanjeev Kavish and Associates Chartered Accountants

  8. Highlights of Budget,2013 II)Extention of Sunset date under section 80IA for Power Sector With a view to provide further time to the undertakings to commence the eligible activity to avail the tax incentive, it is proposed to amend the above provisions to extend the terminal date for a further period up to 31st March, 2017 i.e. till the end of the 12th Five Year Plan. These amendments will take effect from 1st April, 2014. III)Deduction in respect of capital expenditure on specified business • It  is  proposed  to  include  two  new  businesses  as  “specified  business”  for  the  purposes  of  the investment‐linked  deduction  under  section  35AD  so as  to  promote investment in  these  sectors, which are :‐   •  laying and operating a slurry pipeline for the transportation of iron ore;  •  setting up and operating a semiconductor wafer  fabrication manufacturing unit, if such unit is notified by the Board in accordance with the prescribed guidelines.  Sanjeev Kavish and Associates Chartered Accountants

  9. Highlights of Budget,2014 It  is  also  proposed  to  provide  that  the  date  of  commencement  of  operations  for  availing investment linked deduction in respect of the two new specified businesses shall be on or after 1st April, 2014. • Capital asset to be used for minimum 8 years. • Withdrawal of exemption if asset is used for other purposes • Deduction u/s 10AA shall not be available. These amendments will take effect From 1st April, 2015 & will , accordingly , apply in relation to the assessment year 2015-16 & subsequent assessment years. Sanjeev Kavish and Associates Chartered Accountants

  10. Highlights of Budget,2014 D. RELIEF AND WELFARE MEASURES  I)Investment Limit for Deduction u/s 80C increased The investment limits has been increased from Rs. 1.00 lacs to rs.1.50 lacs. (wef AY 2015-16) II). Extention of section 80CCD deduction benefits to private sector employees (w.e.f. AY 2015-16) Benefit extended for employees in the private sector, joining the New Pension Scheme (NPS) for deduction of amount so paid not exceeding 10% of salary III). Housing Loan Interest deduction limit increased The limit for claiming deduction for interest paid on housing loan for self occupied house has been raised from Rs. 1.50 lacs to Rs. 2.00 lacs (w.e.f. AY 2015-16). Sanjeev Kavish and Associates Chartered Accountants

  11. Highlights of Budget,2014 IV) Concessional rate of tax on overseas borrowing Concessional withholding tax rate of 5% u/s 194LC shall now also apply to any long-term bond and , not only to long term infrastructure bond only. It is further proposed to extend the benefit by two years the period of borrowing for which the said benefit shall be available. The concessional rate of withholding tax will now be available in respect of borrowings made before 1st day of July, 2017 Section 206AA of the Act provides for levy of higher rate of withholding tax in case the recipient of  income  does  not  provide  permanent account  number  to  the  deductor.  An  exception  from applicability of  section  206AA in  respect  of  payment  of interest  on long‐term infrastructure  bonds eligible for benefit under section 194LC is currently provided in sub‐section (7) of this section.  Sanjeev Kavish and Associates Chartered Accountants

  12. Highlights of Budget,2014 Consequential amendment is also proposed in section 206AA to ensure that  this benefit of exemption is extended to payment of interest on any long‐term bond referred to in section 194LC.  These amendments will take effect from 1st October, 2014.  V) Roll back provision in Advance Pricing Agreement Scheme  It is proposed to amend the Act to provide roll back mechanism in the APA scheme. The APA may, subject to such prescribed conditions, procedure and manner, provide for determining the arm’s length price  or  for specifying  the manner in which arm’s length price is  to be determined in relation  to  an  international  transaction  entered  into  by  a  person  during  any  period  not  exceeding four previous  years  preceding  the  first  of  the  previous  years  for  which  the  advance  pricing agreement applies in respect of the international transaction to be undertaken in future.  This Amendment will take effect from 1st October, 2014. Sanjeev Kavish and Associates Chartered Accountants

  13. Highlights of Budget,2014 VI)Characterization of Income in case of Foreign Institutional Investor.   It  is  proposed  to  amend  the  Act  to  provide  that  any security held by foreign institutional investor which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital  asset  only  so  that  any income  arising  from  transfer  of such  security by  a  Foreign  Portfolio Investor (FPI) would be in the nature of capital gain. This Amendment will take effect from 1st April, 2014. Sanjeev Kavish and Associates Chartered Accountants

  14. Highlights of Budget,2014 E.WIDENING OF TAX BASE AND ANTI TAX AVOIDANCE MEASURES • Alternate Minimum Tax  It  is  proposed  to amend  the  section  so  as  to  provide  that  total  income  shall  be increased  by the  deduction  claimed under section 35AD for purpose of computation of adjusted total income.  Amendment applicable from 1stApril,2014. II) Taxability of advance for transfer of a capital asset It is proposed to insert a new clause (ix) in sub‐section (2) of section 56 to provide for the taxability of any sum of money, received as an advance or otherwise in the course of negotiations for transfer of  a  capital  asset.  Such  sum  shall  be  chargeable  to income‐tax under  the head  ‘income  from  other sources’ if such sum is forfeited and the  negotiations do not result in transfer of such capital asset. A consequential amendment in clause (24) of section (2) is also being made to  include such sum in the definition of the term 'income'. Sanjeev Kavish and Associates Chartered Accountants

  15. Highlights of Budget,2014 III)Tax deduction at source from non‐exempt payments made under life insurance policy In  order  to have a mechanism  for  reporting  of  transactions and collection  of  tax in  respect  of sum paid  under  life  insurance policies  which  are  not  exempted  under  section  10(10D)  of  the  Act,  it  is proposed to insert a new section in the Act to provide for deduction of tax at the rate of 2 per cent on sum paid under a life insurance policy, including the sum allocated by way of bonus, which are not exempt under section 10(10D) of the Act. In order to reduce the compliance burden on the small tax payers,  it  has  also been  proposed  that  no  deduction  under  this  provision  shall  be  made  if  the aggregate sum paid in a financial year to an assessee is less than Rs.1,00,000/‐.   This amendment will take effect from 1st October, 2014. Sanjeev Kavish and Associates Chartered Accountants

  16. Highlights of Budget,2014 F. RATIONALISATION MEASURES I)Rationalization of taxation regime in the case of  charitable trusts and institutions  It  is  also  proposed  to  amend  the  Act  to  provide that  under  section  11  and section 10(23C), income for the purposes of application shall be determined  without any deduction or allowance by way  of depreciation  or otherwise in  respect of any asset, acquisition of which has been  claimed  as  an  application  of  income under  these  sections in  the  same  or  any  other  previous year. Sanjeev Kavish and Associates Chartered Accountants

  17. Highlights of Budget,2014 II)Clarification in respect of section 10(23C) of the Act It  is  proposed  to  amend  section  10(23C)  by  inserting  an  Explanation  that  if  the  Government grant to a university or other educational institution, hospital or other institution during the  relevant previous  year exceeds a percentage  (to be prescribed)of  the  total  receipts  (including any  voluntary  contributions),  of such  university  or  other  educational institution,  hospital  or  other institution, as  the case may be, then such university or other educational  institution, hospital or other institution shall be  considered as being substantially  financed by  the Government  for  that previous year.[ Applicable from 1stApril,2014] Sanjeev Kavish and Associates Chartered Accountants

  18. Highlights of Budget,2014 III)Cancellation of registration of the trust or institution in certain cases It is proposed to amend section 12AA of the Act to provide that where a trust or an institution has been granted registration, and subsequently it is noticed that its activities are being carried out in such a manner that,—  • its income does not endure for the benefit of general public;  • it  is  for  benefit  of  any  particular  religious  community  or  caste  (in  case  it  is  established  after commencement of the Act);  • any income or property of the trust is applied for benefit of specified persons like author of trust, trustees etc.; or  • its funds are invested in prohibited modes,  then  the  Principal  Commissioner  or  the  Commissioner may  cancel the  registration if  such  trust  or institution does not prove that there was a reasonable cause for the activities  to be carried out in the above manner.  This amendment will take effect from 1st October, 2014. Sanjeev Kavish and Associates Chartered Accountants

  19. Highlights of Budget,2014 IV)Anonymous donations under section 115BBC It is proposed  to amend section 115BBC  to provide  that  the income‐tax payable shall be the aggregate of the amount of income‐tax calculated at the rate of thirty per cent on the aggregate of donations  received  in  excess  of  five  per  cent  of  the  total  donations  received  by  the assessee  or  one  lakh  rupees,  whichever  is  higher,  and  the  amount  of  income‐tax  with  which  the assessee  would  have  been  chargeable  had  his  total  income  been  reduced  by  the  aggregate  of  the  anonymous donations which is in excess of  the  five per cent  of the  total donations received by  the assessee or one lakh  rupees, as the case may be.  This amendment will take effect from 1st April, 2014. Sanjeev Kavish and Associates Chartered Accountants

  20. Highlights of Budget,2014 V)Rationalization of the Definition of International  Transaction  It  is  proposed  to  amend  section  92B  of  the  Act  to provide  that  where,  in  respect  of  a transaction entered into by an enterprise with a person  other  than an associated enterprise,  there exists  a  prior agreement in  relation to  the  relevant  transaction  between  the  other  person and  the associated enterprise  or, where  the  terms  of  the  relevant  transaction are  determined in  substance between such other person and the associated enterprise, and either the enterprise or the associated enterprise  or  both  of  them  are  non‐resident,  then  such  transaction  shall  be  deemed  to  be  an international  transaction  entered  into  between  two  associated  enterprises,  whether  or  not  such other person is a non‐resident. This amendment is applicable from 1stApril,2014. Sanjeev Kavish and Associates Chartered Accountants

  21. Highlights of Budget,2014 VI)Levy of Penalty under section 271G by Transfer Pricing Officers  It is, therefore, proposed to amend section 271G of the  Act to include TPO, as referred to in Section 92CA, as an authority competent to levy the penalty under section 271G  in addition to the Assessing Officer and the Commissioner (Appeals).  This amendment will take effect from 1st October,  2014 Sanjeev Kavish and Associates Chartered Accountants

  22. Highlights of Budget,2014 VII)Applicability to earlier years of the registration granted to a trust or institution In  order  to  provide  relief  to  such  trusts  and  remove  hardship  in  genuine  cases,  it  is  proposed  to amend section 12 A of the Act to provide that in case where a trust or institution has been granted registration  under section  12AA  of  the  Act,  the  benefit  of  sections  11  and  12  shall  be  available  in respect of any income derived  from property held under trust in any assessment proceeding for an earlier  assessment  year  which  is  pending  before  the  Assessing  Officer  as  on  the  date  of  such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted.   Further,  it  is  proposed  that  no  action  for  reopening  of  an  assessment under  section  147  shall  be taken  by  the  Assessing  Officer  in  the  case  of  such  trust  or  institution  for  any  assessment  year preceding  the  first  assessment  year  for  which  the  registration applies,  merely  for  the  reason  that such trust or institution has not obtained the registration under section 12AA for the said assessment  year.  These amendments will take effect from 1st October, 2014. Sanjeev Kavish and Associates Chartered Accountants

  23. Highlights of Budget,2014 • No Income Tax deductions for expenses by companies on CSR The deductions on only those CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed. This Amendment will take effect from 1st April, 2014. IX)Disallowance of Expenses for non deduction of tax at source • For claiming deduction of payments to non-residents, time limit for payment of TDS shall be date of filing of ITR • The disallowance u/s 40(a)(ia) shall be restricted to 30% of the amount of expenditure claimed • The disallowance u/s 40(a)(ia) shall apply to all expenses on which tax is required to be deducted at source. This Amendment will take effect from 1st April, 2014. Sanjeev Kavish and Associates Chartered Accountants

  24. Highlights of Budget,2014 X) Tax Deduction at Source • It is, proposed to omit clause (i)of sub‐section (3) of section 201 of the Act which provides time  limit  of  two  years for  passing  order  under  section  201(1) of  the  Act  for  cases  in  which  TDS statement have been filed.  •  It is proposed that time limit provided under section 201(3)(ii)  of the Act for passing order under section 201(1) of the Act shall be extended by one more year.  • Provisions  of  section  271H  are proposed to be amended to provide that the penalty under section 271H of the Act shall be levied by the Assessing officer.  This Amendment will take effect from 1st october,2014. Sanjeev Kavish and Associates Chartered Accountants

  25. Highlights of Budget,2014 XI) Uniform rates for Business of Playing Hiring and Leasing Goods Carriage u/s 44AE Uniform presumptive rate of Rs.7,500/ p.m. provided for all types of goods carriage without any distinction between Heavy Goods Vehicle and vehicle other than HGV Applicable from AY 2015-16. XII)Accounting Standards are meant for computation Accounting Standards notified u/s 145 are not meant for maintenance of books. These computation and disclosure standards shall be used for computation of income. AO will be allowed to frame Assessment u/s 144 if standards notified u/s 145(2) has not been followed. Applicable from AY 2015-16. Sanjeev Kavish and Associates Chartered Accountants

  26. Highlights of Budget,2014 XIII)Transfer of Government Security by one non‐resident to another non‐resident  With a view to facilitate listing and trading of Government securities outside India, it is proposed to insert  clause  (viib)of S.47 in  the  said  section  so as  to provide  that any  transfer  of a  capital asset,  being a Government Security  carrying  a  periodic  payment  of  interest,  made  outside  India  through  an intermediary dealing in settlement of securities, by a non‐resident to another non‐resident shall not be considered as transfer for the purpose of charging capital gains Applicable from 1st April, 2014 Sanjeev Kavish and Associates Chartered Accountants

  27. Highlights of Budget,2014 XIV) SpeculativeTranzactions in commodity derivatives Eligible transaction in respect of trading in commodity derivatives carried out in a recognised association and chargeable to commodities transaction tax shall not be considered to be a speculative transaction. Applicable from 1st April, 2014. XV)Capital gains arising from transfer of an asset by way of compulsory acquisition The amount of compensation received in pursuance of an interim order of the court, Tribunal etc. shall be taxable in the previous year in which the final order of such court, Tribunal or other authority is made Applicable from 1st April, 2014. Sanjeev Kavish and Associates Chartered Accountants

  28. Highlights of Budget,2014  XVI)Capital gains exemption in case of investment in a residential house property Section 54(1) amended to provide that relief is available if the investment is made in one residential house. Applicable from 1st April, 2014. XVII)Capital gains exemption on investment in Specified Bonds Relief under section 54EC shall be 50 lacs including the financial year in which the original asset or assets are transferred and the subsequent financial year. Applicable from 1st April, 2014. Sanjeev Kavish and Associates Chartered Accountants

  29. Highlights of Budget,2014 XVIII) Losses in Speculation Business It  is  proposed  to  amend  the  aforesaid  Explanation so as  to  provide  that  the  provision  of  the Explanation shall also not be applicable to a company the principal business of which is the business of trading in shares.  Applicable from AY 2015-16. XIX)New Income tax Authorities New Income tax Authorities (w.e.f. 01/06/2013)Principal Chief Commissioner of Income-tax”, “Principal Commissioner of Income-tax”, “Principal Director General of Income-tax” and “Principal Director of Income-Tax” to be new authorities Applicable from 1st June,2013. Sanjeev Kavish and Associates Chartered Accountants

  30. Highlights of Budget,2014 XX) Power of survey (a) Periodof retention without approval extened to 15 days (b) Power to survey for verifying TDS Compliances Applicable from 1st October, 2014. XXI)Power to call for Information – New Section 133C For verification of information in its possession relating to any person, prescribed income-tax authority, may,issue a notice and call for information or documents. Applicable from 1st October, 2014. Sanjeev Kavish and Associates Chartered Accountants

  31. Highlights of Budget,2014 XXII) Valuation of property, investments etc. u/s 142A • Valuation Officer to estimate the value after taking into account the evidence produced by the assessee and any other evidence in his possession after giving an opportunity of being heard to the assessee. • Time between reference to valuation officer and submission of his report to be excluded from time of completion of assessment. Applicable from 1st October, 2014. XXIII)Interest payable by the assessee under section 220 Liability of  the assessee  to pay interest is based on  the  theory of continuity of  the proceedings and the doctrine of relation back. Accordingly, it is proposed to insert a new sub‐section in section 220 so as to provide that where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then such demand shall be deemed to be valid till the disposal of appeal by the last appellate authority or disposal of proceedings, as  the case may be and such notice of demand shall have effect as provided in section 3 of  the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964. Sanjeev Kavish and Associates Chartered Accountants

  32. Highlights of Budget,2014 It is  further proposed  to provide  that where as a  result of an order under sections specified in  the first  proviso,  the  amount  on which interest was  payable  under  this  section hasbeen  reduced  and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under section 220 is increased,  the assessee shall be liable  to pay interest under sub‐section  (2) of  the  said  section  on  the  amount  payable  as  a  result  of  such  order,  from  the  day immediately  following  the end of the period mentioned in  the  first notice of demand referred  to in sub section(1) of the said section and ending with the day on which the amount is paid.    These amendments will take effect from the 1.10.2014 Sanjeev Kavish and Associates Chartered Accountants

  33. Highlights of Budget,2014 XXIV)Mode of acceptance or repayment of loans and deposits u/s 269SS and 269 T Any acceptance or repayment of any loan or deposit by use of electronic clearing system through a bank account shall not be prohibited under the said sections. Applicable from AY 2015-16. XXV) Failure to produce accounts and documents Section 276D amended to provide for a fine as against the present rate based fine for days under default. Applicable from 1st October , 2014. Sanjeev Kavish and Associates Chartered Accountants

  34. Highlights of Budget,2014 XXVI) Provisional attachment under section 281B  Chief Commissioner, Commissioner, Director General or Director may extend the period of provisional attachment for maximum two years or up to sixty days Applicable from 1st October, 2014 Sanjeev Kavish and Associates Chartered Accountants

  35. Highlights of Budget,2014 XXVII) Credit of Alternate Minimum Tax  With a view to enable an assessee who has paid alternate minimum  tax in any earlier previous year to  claim  credit  of  the  same,  in  any subsequent  year,  it  is  proposed  to  amend  this  section  so  as  to  provide  that  the  credit  for  tax  paid  under  section  115JC  shall be  allowed  in  accordance  with  the provisions of section 115JD, notwithstanding  the conditions mentioned in sub‐section (1)or (2) of section 115JEE.  Sanjeev Kavish and Associates Chartered Accountants

  36. Highlights of Budget,2014 • Thank you Sanjeev Kavish and Associates Chartered Accountants

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